Thursday, March 1, 2012
Clueless commentary about Japan sovereign debt
I’ve been hearing a lot of comments recently from the ranks of the VSP’s (Very Smart People, and I’m being massively facetious here) about the coming need for Japan to roll over $3 trillion in sovereign debt. They are saying it as if it were some giant tsunami rolling in rapidly off the ocean, headed toward the beach. And we—investors—are supposed to be feeling like a bunch of helpless, English tourists trapped on the island of Phuket, 20 minutes after a #10 on the Richter scale underwater earthquake just hit a couple of miles offshore.
Anyone who is saying this or warning of this is monumentally and completely ignorant about the monetary system.
Japan’s debt—all of it—is denominated in yen. Japan makes the yen. It controls ALL yen denominated accounts. The act of “rolling over debt” is merely an accounting procedure at the Bank of Japan (the Japanese central bank). When those securities reach maturity and come due, the Bank of Japan merely credits the reserve accounts of Japanese bond holders by $3 trillion and debits the securities accounts of those same bond holders. What just happened? Not much. It’s like your CD coming due at the bank. What happens there? The bank debits your CD (you no longer have it) and credits your checking account by the amount of the CD.
So is $3 trillion a big number?
Ha!!!!!!!!!!!!!!!!!!!!!
So far this fiscal year (5 mos), the US Treasury rolled over or redeemed $2.6 trillion. Did the world come to an end? For all of 2011, the US Treasury rolled over $7 trillion. We’re all still here and so are the markets. Doing very well thank you very much.
Plain and simple: these people saying these things are clueless. Ignore them.
Subscribe to:
Post Comments (Atom)
4 comments:
Mike, either you or one of the core MMT group needs to respond directly to the criticisms of MMT being put forward on the MMR site and also by Carney. I get the impression that there's a lot of miscomunication and misunderstanding going on, and it's leading some people to make accusations against MMT that are probably unwarranted. At the moment the people responding on the blogs appear to be 'amateurs' rather than the actual MMTers so it would be good if a thorough response were to come from either someone like you or from one of the MMT academics. The issues that are being raised need to be confronted soon, or confusing messages about MMT will continue to circulate.
I'm trying, here at least. I speak to Carney. He says what he says and I don't think I am going to change his mind. Or Cullen's.
MMT is slowly gaining a following, but it's happening and that's good. I've been in the movement for 10 years. What's going on now is exciting and the attacks against MMT will not stand.
Remember what Gandhi said: "First they ignore you. Then they attack you. Then you win."
We're in the attack part.
-M
bernanke plays the game very well and with a very concerned look to all watching
My observation is these VSP have to consistently write something for publication in the media so they can maintain legitimacy as a VS financial analyst. Writing alarmist pieces that warn of impending disaster in financial markets is a proven way of generating activity by investors. The activity then produces commissions on the subsequent trading volume. The alarmist pieces don't have to be based on fact.
Post a Comment